The 10-Year Yield at 5%: Is Your Money Safe?

What is the 10-year Treasury yield? It’s the annual return you earn from lending to the US government for ten years. It is treated as the benchmark “risk-free rate,” so mortgages, corporate bonds and stocks are priced against it. Why are mortgage rates rising? Mortgage rates tend to follow the 10-year yield plus a spread of about 2 points. When the yield rises, mortgage rates usually follow. Why are Treasury yields going up? The main factors are the Fed’s September 17 hike to 3.75-4.00%, hotter inflation, heavy government borrowing and investor demand for more compensation. Economists disagree on how much weight each one deserves. Is a 5% yield really dangerous? It depends on your position. It’s not unusual historically, but it’s a big jump after years near zero. Higher yields hurt borrowers and long-term bond holders, and they help savers. What happens if CPI comes in hot? Investors may expect more Fed hikes, which could push bond prices down, yields up and mortgage rates higher. A cooler reading could do the opposite. CHAPTERS (estimated) 0:00 The one number behind your mortgage 1:12 What is a Treasury yield? 1:57 The risk-free rate, explained 2:52 From near-zero rates to 5% 3:47 Mortgage rates and the lock-in effect 5:19 What 5% means for the stock market 6:32 Banks, bond losses and this week’s earnings 7:29 Why yields are rising: Fed, inflation, debt 9:17 This week: CPI report scenarios 10:16 What it means for savers, borrowers and investors 12:46 Is 5% really dangerous? 13:50 The takeaway This video is general education, not personal financial advice. Talk to a qualified financial professional about your situation. Subscribe for plain-English breakdowns of finance, business and the economy.